• Bernstein (AB) sees downside risk to Apple's December-quarter earnings as sharply higher memory-chip costs pressure iPhone margins.
  • The firm cut its EPS forecast to $2.87 from $3.00, below the $2.92 consensus.
  • Despite the near-term margin pressure, Bernstein maintains its Outperform rating and $370 price target, arguing Apple remains a key gateway to consumer AI.

Memory Costs Bite

Apple Inc. may face a sharper-than-expected hit to its December-quarter profits as a surge in memory-chip prices squeezes iPhone margins, according to a note from Bernstein. The investment firm lowered its earnings per share estimate for the quarter to $2.87 from $3.00, now sitting below the consensus estimate of $2.92. The warning sent a ripple through investor sentiment, though Bernstein stopped short of abandoning its bullish stance.

The core of Bernstein's concern lies in the soaring costs of DRAM and NAND memory, components essential to modern smartphones. The firm estimates that even after factoring in stronger international iPhone pricing, Apple's December-quarter iPhone gross margin could come in at about 40.4%, roughly 390 basis points below consensus. Overall Apple gross margin is projected near 46.2%, about 50 basis points below consensus.

This pressure follows Apple's own recent disclosures. In the June 2026 quarter, Apple reported revenue of $109.4 billion, up 16% year over year, and EPS of $2.02, up 29%. However, reported gross margin of 50.1% included an approximately two-percentage-point benefit from tariff refunds. Excluding that benefit, gross margin was about 48.1%, and management explicitly identified memory costs as a meaningful offset. That underlying trend is now front and center.

A Strategic Tightrope

The memory crunch is not an Apple-specific problem but part of an industry-wide shift. AI data centers are consuming vast quantities of high-performance memory, tightening supply and driving up prices for device makers. Counterpoint data cited by The Verge indicate smartphone DRAM prices rose sharply in 2026. For Apple, the choices are stark: absorb higher costs and protect consumer prices, raise iPhone prices and risk demand, reconfigure memory or sourcing, or lean more heavily on premium models and services. Each path carries trade-offs.

Services offer some cushion. In the June quarter, services revenue reached $30.7 billion, up 12% year over year, and Apple's active installed base exceeded 2.5 billion devices. That scale supports recurring revenue but cannot fully offset hardware margin pressure. Bernstein argues that Apple's ecosystem lock-in and potential to be a central platform for consumer AI underpin its long-term thesis. The firm reiterated an Outperform rating and a $370 price target, even as it trimmed near-term numbers.

The geopolitical backdrop adds another layer. U.S. export controls on advanced semiconductors, including memory-related technologies, and a 25% tariff on certain advanced computing chips introduced in January 2026, have made the supply chain more fragmented. Apple has reportedly explored sourcing memory from China's ChangXin Memory Technologies for devices sold in China, a move that could raise compliance questions amid U.S.–China tensions. Apple did not respond to a request for comment.

What to Watch

Investors will scrutinize Apple's December-quarter report for iPhone average selling prices, product gross margin, inventory levels, and management's margin guidance. Bernstein's revised estimate is only about 2% below consensus, suggesting a meaningful but not catastrophic warning. The broader risk is that sustained component inflation overlaps with softer consumer demand or political limits on supplier flexibility. For now, Apple's brand, pricing power, and AI ambitions remain central to the bull case, but the memory bill is coming due.